Has Level 3 Communications, Inc. (LVLT) Become the Perfect Stock?

With its dual focus on operating a fiber-optic network and acting as an Internet content-delivery service, Level 3 has suffered from big challenges on both sides of its business. Despite offering high-speed service, its network hasn’t generated the cash flow that wireless network providers AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) have managed to produce. Meanwhile, on the content side, the decision that partner Netflix, Inc. (NASDAQ:NFLX) made to move its traffic management in-house will cut the revenue Level 3 Communications, Inc. (NYSE:LVLT) has received from its arrangement with the streaming video company.

In its most recent quarter, Level 3 disappointed investors with a weak earnings report. Although the company saw revenue rise slightly and said that its balance sheet has gotten stronger over the past year, Level 3 Communications, Inc. (NYSE:LVLT) still posted a substantial loss for the fourth quarter. Expectations for seasonally weak sales in the current quarter also held back the stock.

The big hope for Level 3 is that a big acquirer might decide to buy out the company. With Google Inc (NASDAQ:GOOG) delivering high-speed service via its fiber-network experiment, Level 3’s network might become more relevant. Yet with so much debt, Level 3’s $12 billion enterprise value may prove a bit high for potential buyers despite arguably offering reasonable value.

For Level 3 Communications, Inc. (NYSE:LVLT) to improve, it needs to find better sources of profitable sales. Unless it can do so, Level 3 is doomed to remain far from perfection for the foreseeable future.

The article Has Level 3 Communications Become the Perfect Stock? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Google and Netflix. The Motley Fool owns shares of Google and Netflix.

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